Women in Venture Capital

Did you know that in 2022 Venture Capitalists invested $445 billion dollars globally into tech companies? That’s a lot of cheddar! My team at Ethical Digital, along with great partners, has been studying the industry. The research project, The Allyship, recently released a report about what we can do to reach gender parity in this highly influential area. 

Let’s get into the research and its important findings. 

What’s Venture Capital? 

First of all, venture capital essentially funds the internet. It’s an important part of the technology development ecosystem. Investors will pool their money into funds and venture capitalists will find technology companies that will grow to make more money and show a return to their investors. 

Many tech companies rely on investment because the cost of early development often outweighs the revenues, especially when they’re first starting. Getting investment can help you grow much faster as a company. 

Why Do We Need More Women in VC? 

In 2019, women were only 13% of American partners and 15% of Canadian partners in VC firms. It’s been shown that female VCs interact more with women entrepreneurs, a connection that improves the likelihood that women and racialized people will receive funding. 

This is important because unfortunately, women-owned technology firms have only received less than 2% of the billions of dollars invested into the internet. This is a problem because the idea of technology is that it’s here to solve problems and women-led companies are not getting the same chances of success. 

Interesting fact: there is research that showed when the same idea was pitched to VCs using men’s and women’s voices, two-thirds of investors chose to invest in the ideas pitched by a man’s voice. 

Like tends to invest in like—so having a diverse investing community is important to give more people, especially women, opportunities to benefit from the internet economy. 

The Economic Benefits of More Women in VC

That’s right—they’ve found that a 10% increase in women partners in VC firms resulted in a 1.5% increase in financial returns. 

Also, women-led startups show 35% greater returns on investment and 12% on revenues when compared to startups led by men. The numbers are there to back diversity up. 

The Women in VC Research Findings

We worked with three great partners on this research: 

1. The Diversity Institute from Toronto Metropolitan University

2. Neal Dempsey, a venture capitalist from the Bay area who has invested in several women-led startups in Saskatoon like Coconut Software and SalonScale

3. National Angel Capital Organization (NACO): Canada’s Angel Capital network

With these partners, we interviewed male and female venture capitalists from Canada and the United States to find some solutions. 

There are many approaches we can take. 

• Let young women know about venture capital as a career and provide funding for internships and scholarships

• Develop better parental leave options at VC firms

• Ensure VC firms are gathering and reporting data on their hiring practices

• Work with the existing VC community to change mindsets and show there’s a return on investment for opening their firms to more women

We believe that if technology is the future, all people should have the same opportunity to participate in creating that future. We’re the first generation of the internet—what kind of legacy do we want to be building for the future?